The following discussion and analysis of financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this report. The information
and financial data discussed below is only a summary and should be read in
conjunction with the historical financial statements and related notes contained
elsewhere in this 10-K. The financial statements contained elsewhere in this
10-K fully represent the Company's financial condition and operations; however,
they are not indicative of the Company's future performance. Although management
believes that the assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual results
will not be different from expectations expressed in this 10-K.
General Overview
We are an innovative bioscience company that has developed an effective germ
fighter, DiOx+, a disinfectant sterilizer that kills 99.99% of harmful pathogens
without dangerous toxic exposure to the user or the environment. Our DiOx+ is an
activated chlorine dioxide (Cl02) broad spectrum disinfectant that kills
dangerous pathogens with no residual toxicity. It protects the environment and
human health from viruses, bacteria and harmful by-products left by other
cleaning sanitizers, without a harsh smell or skin irritation. Our proprietary
chemical formulas and processes make DiOx+ ideal for sterilizing mission
critical, high value medical equipment and disinfecting air and surfaces in
laboratory and hospital environments. DiOx+ helps protect agricultural crops
from disease and other pathogens like mold and fungus It is used in water
treatment plants, and helps reduce operational costs in warehousing,
distribution centers, and ecommerce support facilities.
11
Results of Operations Year Ended December 31, 2022, compared to Year Ended
December 31, 2021
Year Ended December 31,
2022 2021 Change ($) Change (%)
Revenue $ 34,434 $ 86,259 (51,825 ) (60.0 )%
Cost of revenue 12,514 30,946 18,432 59.6 %
Gross profit 21,920 55,313 (33,393 ) (60.4 )%
Operating expenses 2,301,603 4,831,548 2,529,945 52.4 %
Loss from operations (2,279,683 ) (4,776,235 ) 2,496,552 52.3 %
Other expense (2,520,514 ) (1,093,791 ) (1,426,723 ) (130.4 )%
Net loss $ (4,800,197 ) $ (5,870,026 ) $ 1,069,829 18.2 %
Revenue
Revenue decreased by $51,825 or 60% from the previous year to $34,434 during the
current year compared to $86,259 during the previous year. The decrease is due
to the ongoing negative impact of the COVID-19 outbreak in March 2020. During
the year ended December 31, 2021, the Company recognized approximately one time
$23,000 of additional revenue related to packaging and shipping services of
product for a third-party customer, which did not occur during the year ended
December 31, 2022.
Cost of Revenue
The Company's cost of sales was $12,514 for the year ended December 31, 2022, a
decrease of $18,432 or approximately 59.6%, compared to $30,946 for the year
ended December 31, 2021. The decrease in cost of revenue was due to the impact
of COVID-19 and the resulting decrease in revenue. Gross profit remained
consistent year over year at 63.7% and 64.1% for the years ended December 31,
2022 and 2021, respectively.
Operating Expenses
Operating expenses for the year ended December 31, 2022, and December 31, 2021,
were $2,301,603 and $4,831,548, respectively. The decrease was primarily
attributable to a decrease in share-based compensation expense by approximately
$2.9 million resulting from the fair value of shares of common stock issued to
our former Chief Executive Officer and former Chief Operating Officer pursuant
to their respective employment agreements and the issuance of shares of common
stock and Series A Preferred stock pursuant to the asset purchase agreement with
Matrix Of Life Tech Trust, offset by an increase of advertising and marketing
expense by $0.2 million.
Other Expense
Other expenses were $2,520,514 and $1,093,791 for the years ended December 31,
2021, and 2020, respectively.
Other expense for the year ended December 31, 2022, consisted of $1,908,043 of
expense resulting from changes in fair value of derivatives, $1,218,906 of
interest expense, and $1,588,140 of loss on Series A Preferred Stock conversion
to common stock, offset by $2,194,575 of gain on debt conversion.
Other expense for the year ended December 31, 2021, consisted of $1,955,459 of
income resulting from changes in fair value of derivatives, $1,157,166 of
interest expense, $134,379 of gain on debt conversion, and $2,026,463 of loss on
Series A Preferred Stock conversion to common stock.
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Net Loss
Net loss for the year ended December 31, 2022, was $4,800,197, compared with
$5,870,026 for the year ended December 31, 2021. The increase in our net loss
resulted from the reasons outlined above.
Liquidity and Capital Resources
Our working capital deficiency as of December 31, 2022 and December 31, 2021,
was as follows:
December 31, December 31,
2022 2021
Current Assets $ 39,868 $ 127,104
Current Liabilities $ 70,809,778 $ 71,626,880
Working Capital Deficit $ (70,769,910 ) $ (71,499,776 )
The overall working capital deficit decreased from $71,499,776 at December 31,
2021, to $70,769,910 at December 31, 2022. The current liabilities primarily
consist of loans payable, convertible notes payable, derivative liability from
the bifurcated conversion feature embedded in the hybrid debt instruments,
related party liabilities, and liability-classified Series A Preferred Stock.
The decrease in working capital deficit is mainly attributable to the conversion
of Series A Preferred Stock to common stock in the fiscal year ended December
31, 2022.
The following is selected information from the statements of cash flow for the
years ended December 31, 2022, and December 31, 2021:
December 31, December 31,
2022 2021
Cash used in Operating Activities $ (253,710 ) $ (553,772 )
Cash used in Investing Activities $ (14,914 ) $ (5,614 )
Cash provided by Financing Activities $ 245,394 $ 575,554
Net Increase (Decrease) in Cash During Period $ (23,230 ) $ 16,168
Going Concern
Since January 1, 2022, and through December 31, 2022, the Company has raised
approximately $0.2 million in debt transactions. These funds have been used to
fund on-going corporate operations. Our accompanying financial statements have
been prepared assuming the Company will continue as a going concern, which
contemplates realization of assets and the satisfaction of liabilities in the
normal course of business for the twelve-month period following the date of
these financial statements. Our cash on hand at December 31, 2022 was less than
$1,000. The Company has incurred substantial losses since inception. Its current
liabilities exceed its current assets and available cash is not sufficient to
fund expected future operations. The Company is contemplating raising additional
capital through debt and equity in order to continue the funding of its
operations, which may have the effect of diluting the holdings of existing
shareholders. However, there is no assurance that the Company can raise
sufficient funds or generate sufficient revenues to pay its obligations as they
become due, which raises substantial doubt about our ability to continue as a
going concern.
The ability of the Company to continue as a going concern is dependent on the
Company's ability to raise additional capital and implement its business plan.
The Company requires additional capital to fully execute its marketing program
and fund its current operations and development. Presently we are relying on
raising additional funding to meet operational shortfalls. There can be no
assurance that continued funding will be available on satisfactory terms. We
intend to raise additional capital through the sale of equity, loans, or other
short-term financing options.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to stockholders.
13
Seasonality
Management does not believe that our current business segment is seasonal to any
material extent.
Significant Accounting Policies
Our discussion and analysis of our results of operations and liquidity and
capital resources are based on our financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and disclosure of contingent assets and liabilities. On
an ongoing basis, we evaluate our estimates and judgments, including those
related to revenue recognition, allowance for doubtful accounts, warranty
liabilities, share-based payments, income taxes and litigation. We base our
estimates on historical and anticipated results and trends and on various other
assumptions that we believe are reasonable under the circumstances, including
assumptions as to future events. These estimates form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. By their nature, estimates are subject to
an inherent degree of uncertainty. Actual results that differ from our estimates
could have a significant adverse effect on our operating results and financial
position. We believe that the significant accounting policies and assumptions as
detailed in Note 1 to the financial statements contained herein may involve a
higher degree of judgment and complexity than others.
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